micros ramblings

Naked Puts - a tool for the value investor or for those seeking interest like returns?

2010-05-18T19:54:00.000-07:00

Reading an article this morning reminded me of an investment technique
which in some cases might be intriguing to the value investor.

http://www.futuresmag.com/Issues/2010/May-2010/Pages/Naked-put-vs-covered-call-Whats-riskier.aspx

This may be a meaningful concept to the value investor to sell naked puts
on the stock you want to hold at the right price.

Lets say you have determined WAG is a value stock, you want to hold,
but you would prefer to buy it at 33 rather than the present price of 35.20
and your analysis of the chart indicates a reasonable probability that you
might have that opportunity in the not too distant future.

Instead of putting in a limit buy order to buy the stock at 33, sell a
naked put. For this example sell a July 10 Put with 33 strike for $.83.
For each contract you sell, you will collect $83 minus commissions. At
some brokers, this could be as little as $1 or $2.

If WAG rises instead of dropping, you might consider buying your put
back when it is considerably cheaper. The value will also drop as it gets
closer to expiration.

At or anytime before expiration, if the stock should drop below $33 the
stock can be assigned to your contract and you will own the stock at
$33, but actually you will own it at $33-$.83

Of course you must consider commissions and assignment charges at
the broker.

Also whether you are willing to have the capital to purchase the stock
tied up without having the potential for upside.

If the stock never drops to you strike price in this example assuming
$80 after commissions you will pocket 2.48% for tying up
$3300-$83 for 59 days'

What is the downside risk? The market severely drops and the stock
follows. Or the stock has very bad news and you really have a wrong
estimation of value.

In that case you could end up with a stock at a price, at a price you are
no longer happy with.

The other uncomfortable and possibly very uncomfortable area is if
the stock drops to say $25. The purchaser of your put has no
requirement to assign the put to you. Therefore, if you want out prior
to expiration you will be faced with a very expensive put to buy back.

If today the stock dropped to $25 the put would be trading closer
to $33-$25 or $8 plus possibly some minimal time value.

Meanwhile, you are locked in till stock is assigned to your put or expiration.

In either case, if the stock is below $33 when this event occurs you will be
buying at $33.

At some brokers this strategy can even be undertaken in an IRA with the
proper permissions. Interactive Brokers is one of those.

Please do not construe this blog as investment advice! It isn't! You are
responsible for your own investments, research, and decision process leading
to such.

Best of Luck!
Micro

Ouch .... Thinking I was very wrong on the QQQQ, QID

2008-06-05T06:07:00.000-07:00

I am thinking I was very wrong on the QQQQ, QID idea. I think technology is overriding the weakness in the financial's.

Technology may even turn those around.

I am closing QID position, but then possibly sitting on my hands, till I get a better feel.

Crude oil, comments on blogs, market, Obama, Hillary Clinton, healthcare, Technical Analysis

2008-06-04T04:59:00.000-07:00

I am somewhat distracted from the market at the moment, due to a short trip and some other matters. I hope it is not the ostrich effect and I have my head in the sand because I don't want to see what is happening.

If you read this, a comment would be appreciated. I note on my stat counter, I have some folks end up here. If you agree or disagree, that would be great to know. Or you can send me an email at themicrokid@gmail.com.

I have been buying a bit of QID. I wouldn't be surprised to see the market drop, not sure the reason. Possibly the acceptance of almost 100% possibility of Obama as a presidential candidate. He raises the uncertainty level. I think everyone is certain what Hillary would have done in the Whitehouse in any situation. I think they would have been surprised. But Obama has stated a lot of things and the idea of higher taxes is scary. Corporate America may be pretty warm to universal healthcare though. Healthcare today is a major tax on businesses of every size. But there are so many other questions.

Looking at some charts and some quick observations.
The US dollar, may face some resistance here.
$WTIC (on stockcharts), crude oil has been in a well defined channel upwards for about 3 to 4 months. Right now, it is at the bottom of the channel. A touch of DUG might be in order, if it breaks down.
Gold and Silver (GLD and SLV) both seem to have a small inverse H&S bottom possibility forming. Dollar weakness would help this to happen.
I was reading somewhere, small caps led the rally, maybe they are a better short on Inverse equity than the QQQQ's then. QQQQ's appear to have made a double top. But there is some support right below at 48. Sideways channel time?

I was surprised the other day by crude oil going up and DUG going up at the same time. Please understand, these leveraged ETF's are all artificial products. They mostly obey the market, but not always.

I was talking to a nuclear power industry executive the other night. He is long term bullish on more nuke plants. One of the topics we were discussing was hte parts supply for present plants and the need to get safety permissions on every small change in the process of the safety critical parts. This is one reason, hopefully the future will bring very standardized systems to reduce the life cost.

We found it ironic, one of the parts they were sourcing was being made by an Areva plant located in anti-nuclear Germany.

And of course Obama has made antinuclear noises.

I have rambled enough, now I must go face the realities of the day.

Some of my positions: Long QID, DUG, GDX (gold mining ETF), various Uranium plays.

Please don't construe anything I write as advice. You are responsible for your own investments.

Best of Fortunes

Should you sell COVERED CALLS?

2008-05-24T12:35:00.000-07:00

My Covered Call Rules

My rules for writing covered calls: 1) I am willing to hold the stock for the long term. 2) I am willing to risk loosing the stock, if there is blowout news or the long term market uptrend continues. 3) I am not putting myself in a position to take a loss, I am not willing to take.

Should you sell COVERED CALLS?

The issue with buying options is time is working against you. The safest money in options is probably selling covered calls on stocks you are willing to hold for the long term. This makes time work in your favor.

I typically will only do this, it the call plus the premium is such I will be left with an acceptable profit, if the call ends in the money and the stock is called away. My goal in doing this is to establish the strike price, so it is likely not to be hit by expiration.

The advantage of not having it called away, is then I can turn around and sell a call again for a future expiration. I can view from an accounting (NOT TAX ACCOUNTING) each premium collected as reducing my cost of the underlying equity. If you do this on a stock that has a potential for a rapid price increment, you may be disappointed because you will have lost out on the big gain.

HISTORICAL and ONGOING EXAMPLE

Let me work through an example: EBAY closed at 30.87 of Friday, if I owned EBAY, on Friday I could have sold a 32.50 April call for $.62. Lets assume I bought EBAY with a cost of $30.75 and was willing own EBAY irrespective of its earnings coming up next week. If EBAY rises in the next week and my call is exercised, I will make 1.75 (32.50 -30.75) and the $.62 premium. A return of 7.7% for owning EBAY for a week. Of course, I have ignored commissions in this.

And, if EBAY turns in only okay earnings, my call won't be exercised and I can view my cost of owning EBAY as $30.13. Then a week from Monday, I can start looking at the potential for selling a May or later call on EBAY. Last trade on a May 30 was $2.29 and a $32.50 was $1.03

Where's the downside? EBAY has bad earnings and guidance. The price drops. I have to decide, if I stay a long term investor in EBAY or if I buy my discounted call back and sell the stock. EBAY has great guidance and the stock soars, I get my 7.7% for my ownership.

I sold the call, EBAY closed at less than $32.50, and since I did this in an IRA where there is no tax implication, I can view the cost of my EBAY as the $30.75 purchase price minus the $.62 premium I pocketed.

Then on April 18, I sold a July 35 call for $1.00. Now I can view my cost at $30.75 - $.62 - $1.00 or $29.13.

EBAY has been weak, I could buy my July 35 call back for $.42. Raising my cost to $29.75. Then I would have some alternatives: 1) Sell the stock and end up with only about $.50 profit. 2) Keep the stock and wait for the price to go up before selling a future call. 3) Sell a call right now.

Lets explore #3:

A) Sell July 32.50 call for .95, lowering my cost to $28.80. It does increase the chance I could be called away.

B) Sell July 30 call for $1.95, lowering my cost to $26.85. Unless I expect really a weak future for the next 55 days for EBAY, this says I have decided to bail on EBAY most likely. But I want to walk away with a profit $3.15 per share before commissions. And if by chance it is below $30, I have the ability to continue selling calls.

C) Sell June 30 call for $1.20, lowering my cost to $27.60. If I see short term weakness in EBAY and/or the market this is tempting, because it gets my stock free sooner to sell another call, but it runs a high chance of being called away leaving me with a profit before commissions of $2.40 per share. This gets me my money a month sooner than choice B.

Choice C actually, in some cases may be an attractive way to sell a stock, if you are not in a hurry to sell and you would rather be paid to sell it, rather than paying to sell it.

ANOTHER EXAMPLE

Supergen has an approved cancer drug they are licensing to a Japanese company. The stock has been beaten down on speculation that an ongoing study will show it may be inferior in extending life to a competitor. The competitor and Supergen roughly split the US market. If the study turns out positive, then J&J will file to sell Supergen’s drug in Europe. Therefore investing in Supergen, I am investing in a company with cash in the bank, near cash flow neutral, a pipeline of drugs. Supergen has about $1.40 cash per share and is trading at $2.50.

Let’s work through one potential example with actual commissions.

Buy 1200 shares of SUPG @ $2.50 = -$3009.95

Sell 12 July 2.50 calls at $.45 = $ 521.01 After $9.95 +$.75 per contract

Assuming exercise @$2.50 = $2980.01 After $19.99 assignment fee

Profit = $ 491.07 or 16.3% for tying up money for 55 days.

Some Possibilities:

1) The data turns out great and the stock soars, I have lost out on anymore profit. Maybe I should take the $491.07 and buy 200 more shares with no calls sold.

2) The data is terrible and the stock goes down, I am not in the red until the stock drops below $2.07 per share. The $1.40 in cash per share seems to provide some floor.

3) The data is delayed and the stock trades below $2.50 at options exercise. I dance and sing because I can set up another options sale.

Another example:

Buy 1200 shares of SUPG @ $2.50 = -$3009.95

Sell 12 Jan 2009 2.50 at $.85 = $ 981.02 After $9.95 +$.75 per contract

Assuming exercise @$2.50 = $2980.01 After $19.99 assignment fee

Profit = $ 951.08 or 31.6% for tying up money for 237 days.

The Jan 09 5 calls at .35 is another interesting call to consider selling. This provides the potential for doubling the money on a positive outcome.

SUMMARY

Covered calls may be used as a profit machine.

Covered calls will limit your upside gain.

Covered calls will provide some limited downside protection.

The risks are limited to the share price minus the premium obtained for the call sold.

Disclosure: Long EBAY, SUPG, UNG, DUG stock and Short EBAY, SUPG, UNG, and DUG calls.

Covered Calls aren't for everyone. This is not investment advice, it is educational in nature only. You and only you are responsible for your investment decisions.

Best of fortunes in your investment decisions.

Micro

themicrokid@yahoo.com

2008-05-20T17:40:00.000-07:00

I was reading a post on seekingalpha http://seekingalpha.com/article/78032-leveraged-etfs-buy-and-holders-beware-these-are-for-active-traders on leveraged ETFs and the issues with using them in a Buy and Hold strategy. It was tossing a lot of percentages about and I get dizzy when people talk about what happens when you drop 40% and have to gain xx% to get back to where you were.

I always like to do some simple math to see, if the thesis and methodology is correct. My analysis by taking the historical adjusted for splits and dividends showed it was directionally accurate. I didn't worry about absolute accuracy.

I am not so sure, financials are dead. They seem to have a way to keep making money, probably because everybody has to use them. I am less certain, if a bottom is in. There seems to be a water torture way to try to find a new set of problems.

I did a quick study on QQQQ, QLD, and QID to see some real cases.

I picked 5/19/2008 as the closing date and assumed purchases on three dates of an equal dollar amount. The first two dates were picked without paying attention to the market. The third was picked to assure the QQQQ's were high, to see, the effect of the QID's.

One issue with this study is leveraged ETF's are a new phenomena. I could have performed this with Rydex mutual funds and went back much farther.

Purchase 8/1/2006 a few weeks after the launch of QLD.
Gain 5/19/2008 QQQQ 37%, QLD 59%, QID -46%

If you were long QLD, you are much happier than long QQQQ. If you were long QID, you were out to lunch.

Purchase 7/31/2007 a year later.
Gain 5/19/2008 QQQQ 5%, QLD 1%, QID -16%

Spinning wheels, unless you were in the bearish QID.

Purchase 10/26/2007 chosen to have a fairly high QQQQ
Gain 5/19/2008 QQQQ -8%, QLD -20%, QID 9%

Only QID would have you happy and you would be much happier, if you had bailed from it on March 10, 2008. Gain 5/19/2008 QQQQ -23%, QLD -44%, QID 65%

This suggests, if you can play horseshoes with tops and bottoms, you can make yourself very happy with leveraged ETF's.

All these percentages are adjusted for dividend payouts. Yes, even leveraged ETF's may pay out dividends at times.

********** Switching Gears********

Leveraged funds have a couple of other characteristics. 1) They are
not an investment in equities, but in futures and other derivatives. Therefore, they do not always meet their 2x objective, even while in a trend and occasionally beat it. 2) On some of them the spreads and the intraday hysteria may make them significantly off their tracking index.

***************************************************************************************
All the usual disclosures apply, this is for education and not advice to trade or invest on. You are responsible for your own decisions.

Results form Market Timing Question on Linkedin

2008-04-20T17:50:00.000-07:00

Thank you for answering the question on market timing. I learned some things from the answers and identified a couple of good references. I decided to write a summary and send it to those who answered the question. I also will post it on a blog.

I think the educational material one respondent suggested at Morningstar is very good. http://www.morningstar.com/Cover/classroom.html

The CAPS concept is interesting. http://caps.fool.com/

Analyzing the responses, I concluded 27% of the aswers from fairly pure market timers, 20% from those who consider the time element important, 33% from those who take the oppoortunity to buy more aggresively at a minimum when stocks are undervalued, and 20% who avoid timing completely. In other words, 53% would claim they were not market timers. Of course this in not a scientific survey.

Interestingly, two people suggested Warren Buffet as their guru and reason not to time the market. While Warren's favorite holding period may be forever, he has a record of selling stocks. I would guess, because he thinks those stocks are overvalued and therefore likely to fall or not do as well as the market in general.

I do enjoy this quote from Warren Buffet, "I think we’ve got fabulous capital markets in this country, and they get screwed up often enough to make them even more fabulous. I mean, you don’t want a capital market that functions perfectly if you’re in my business,"

This getting screwed up every so often is what every market timer wants!

When it game to influencers/gurus, Philip Fisher received one mention, while Buffett, Modern Portfolio Theory, Random Walk, Peter Lynch, and trend following all received two mentions.

I seriously doubt anyone will convince anyone to move from one investing style to another.

I do pay considerable attention to one market time, Robert Drach, who has demonstrated he can beat the market, since 1995 in a public forum and since 1995 in a private forum. You can find his public trades I referred to at: http://www.pbs.org/nbr/site/research/investors/drach/drach/

Two people suggested their websites, which were very focused on the concept of market timing.
http://futuristicinvesting.blogspot.com/
http://www.savingsandloans.co.nz/occasional_papers.htm

Again, much thanks.

Best Fortunes in your investing,
Micro

Ouch - Can we really trust S&P anymore?

2008-04-20T17:43:00.000-07:00

Can we really trust S&P anymore?

The idea Bear Sterns could be destroyed before they alerted us is troubling. A couple years ago, they missed it on Doral.

Clearly, BSC is not going to the target I mentioned earlier.

Best of Fortune in your investing.
Micro

micro (out) look 02/26/2008

2008-02-26T10:40:00.000-08:00

I think, backed up by the logic of the only Guru I listen to, we are soon to see a period of rising stock prices.

The guru has a record of having over 95% profitable positions, since 1977. I have been following, though not investing according to his advice for about a decade. His advice is based strictly on a statistical model.

His current recommendation is to be 125% invested in very high quality stocks: financial's, home builders, insurance, retail, industrial. Of course there is no way AVII would make his list.

One of the things I have done for the past few years is to track the market using charts of indexes and some of the derivative information about those indexes. My charts show that we are in a pattern, that is very typical of bottoms. And likely a bottom is in. I will not be surprised by a retest of the bottom. My chart give no indication of whether a rally will last for 1 month or 1 year. And what the bottom will look like after that rally.

I would guess a rally may follow of 2-4 months and then a bottom, close to the recent bottom. If this happens we could see a longer rally.

If my guru is correct and we match his historical record we will see things like: AIG 76, BSC 160, C 34, DHI 25, HOG 41, COF 83, KIM 38, LOW 35!

Switching to commodities .... If you read Jim Rogers book, "Hot Commodities" which was published in 2004, he makes the point that commodity cycles last for about 15 years, if I recall correctly. The reason for this, is it takes time to build the infrastructure to increase the supply of the commodity.

IMO, this may not apply to commodities increases built almost strictly on speculation. Because in those cases you don't have to wait for more supply. You just have to wait for the speculators to zig when they should have zagged. An example of this is the Hunt Brothers and their attempt to manipulate the silver market.

Therefore, it is quite possible we will have rising commodity prices as long as the Federal Reserve has to ease to counteract their poisoning of the economy.

Also we have two of the most massive population centers on the earth raising their standard of livings. They will both require commodities.

Blend this with the concept of peak oil and generally commodities will be in a long term up trend. This doesn't mean there won't be corrections along the way.

**** These are my comments. Please do not construe them as investment advice. I may change my mind 1 microsecond later. And I have no obligation to notify anybody of such a change. I have been wrong sometimes and right sometimes. Other times just pain irrelevant. You are solely responsible for your own decisions. Best of luck. ****

XEROX - send a card at no cost to a serviceman overseas

2006-08-03T13:54:00.000-07:00

http://www.letssaythanks.com/

I went to the Xerox website and confirmed it was legit.

I think this is a great offer on behalf of Xerox.

And the soldiers deserve our support, be yea pro or con.

Best regards,

Larry

>If you go to this website, www.letssaythanks.com
><http://www.letssaythanks.com/> , you can pick out a thank you card
and
>Xerox will print it and it will be sent to a soldier that is currently
>serving in Iraq. You can't pick out who gets it, but it will go to
some
>member of the armed services.
>
>
>
>How AMAZING it would be if we could get everyone we know to send one
>!!!
>
>
>
>This is great site.
>
>Please send a card.
>
>It is FREE and it only takes a second.
>
>Wouldn't it be truly wonderful if the soldiers received a bunch of
>these?
>
>Whether you are for or against the war, our guys and gals over there
>need to know that we care.

Ouch I have been wrong!!!!

2006-05-04T18:18:00.000-07:00

The market keeps going higher and the amount of money I have in bearish funds keep going down, except as I interject more.

I moved to maybe 60% RYVNX versus 40% RYVYX day before yesterday.

I am really disappointed with my timing ability for the past two months!

I still think a pullback is in order, I am beginning to suspect it may not happen until we see new all time highs on the DJIA.

Overall portfolio wise, I am doing okay due to diversification.

I have been selling some CGMFX, only a part. I will probably buy back around the 50 Day Moving Average.

Best of luck to you!

As always do your own due diligence and make your own decisions. No one knows for certain what tomorrow will bring. Only you can be responsible for your own decisions. I may hold bullish and/or bearish positions without warning and these may change without warning. This is only a part of my investment portfolio. This information is to help me understand my evolving decision process and for education or entertainment of others as desired.

A slight bit of pain today, but sticking with my short term bearish thesis

2006-03-17T14:12:00.000-08:00

I exchanged the last of the leveraged Rydex bullish funds for bearish funds. Plus I added a tad more to the RYCWX.

I still think there is a slim chance the market could break out to the upside. But, I am much more convinced a pull back will happen.

One concern I have, is I don't have in mind any scenario that takes me out of the bear funds until we have some slight correction. The good news from that standpoint is I have a strong enough bullish position in other funds to blunt the pain short of an all out rally.

Best of luck to you!

As always do your own due diligence and make your own decisions. No one knows for certain what tomorrow will bring. Only you can be responsible for your own decisions. I may hold bullish and/or bearish positions without warning and these may change without warning. This is only a part of my investment portfolio. This information is to help me understand my evolving decision process and for education or entertainment of others as desired.

Interim Score Card

2006-03-17T09:56:00.000-08:00

I am pleased as punch!!!!!

YTD Annualized based on YTD
DIA 6% 31%
SPY 5% 28%
QQQQ 2% 12%
MDY 6% 33%
VB 10% 57%

Rydex 12% 75% based on gain/(final value -gain)
17% 117% based on gain/(initial value + one half additions)

Gain = final value - (initial value + additions)

To get these gains, 122 mutual fund exchanges were completed YTD. At TDWaterhouse there is no charge for exchanges. I have no idea of what other brokers do in this regard.

This strategy removes single stock risk. It provides the ability to make money in up and down markets. My gain last year for the Rydex equity strategy was 52%. This is the third year I have been trading these funds with 200% leverage to the DJIA, SPY, and QQQQ.

Best of luck to you!

As always do your own due diligence and make your own decisions. No one knows for certain what tomorrow will bring. Only you can be responsible for your own decisions. I may hold bullish and/or bearish positions without warning and these may change without warning. This is only a part of my investment portfolio. This information is to help me understand my evolving decision process and for education or entertainment of others as desired.

The Semi's are weak and until they are well, I am getting more bearish

2006-03-16T13:12:00.000-08:00

The semis are weak and I think will undermine this rally. I don't think the telecom's can overcome them, but I could be very wrong.
http://stockcharts.com/h-sc/ui?s=smh&p=D&yr=0&mn=6&dy=0&id=p53930487504

Moved half the remaining way into RYVNX and RYTPX and added to a tad to RYCWX. Plus picked up some April puts on the QQQQ's and May on the SPY's. Liquidated about 2% of the long positions in my account. Hanging on to energy,
gold, silver, plus AVII.

Should have a nice gain on my RYVNX today. But AVII was painful.

Still on my short countdown clock for another market decline.

I still think we will be signficantly lower by mid April ($SPX 1230-1180), but there is a slim chance this market could breakout for a real rally. My technical indicators aren't saying that though. Time will tell.

As always do your own due diligence and make your own decisions. No one knows for certain what tomorrow will bring. Only you can be responsible for your own decisions. I may hold bullish and/or bearish positions without warning and these may change without warning.

The real purpose of these notes is to help me understand why I make the moves I make. Looking back I hope to understand what worked and what didn't. Life is a real learning experience with real money, real bodies, real consequences, and real rewards.

Taking a trip to the bearish side, but understand the bull could break loose!

2006-03-15T12:17:00.000-08:00

It looks like my idea that the market was going higher, was not a head fake. The moves I made in the Rydex to the bullish side kept my Rydex losses down. These Rydex positions are to some degree to provide protection to the larger long portion of my portfolio. Unless the market is in a long term uptrend, I don't try to capture all the gains with the Rydex portion. When the market turns to the downside, I really try to make profits with these Rydex investments to stop the losses from long term positions. I have a few mutual funds that are closed and have no intention of leaving strong performers behind me for a short term loss protection. Therefore, this gives me the protection of principal I need.

I clearly did not move bullish enough and did feel some pain in the RYVNX. When you go down twice as fast as then market goes up and the market goes up it can hurt in a hurry!

My current Rydex position is, after shifting to a slightly more market bearish posture tonight:

69% DIA: RYCWX (2v) 100%, RYCVX (2^) 0%
20% S&P: RYTPX (2v) 76%, RYTNX (2^) 24%
11% QQQQ: RYVNX (2v) 87%, RYVYX (2^) 13%

This represents about 16% of my portfolio.

Cash is about 9% and RYWBX(short the USD) is 2.3%.

On the 10th, I said within 7 trading days I would be turning bearish. I made my first move bearish yesterday, and a larger one today. I think we are probably within 4 days of a short term top.

I still think we will be signficantly lower by mid April, but there is a chance this market could breakout for a real rally. My technical indicators aren't saying that though. Time will tell.

As always do your own due diligence and make your own decisions. No one knows for certain what tomorrow will bring. Only you can be responsible for your own decisions. I may hold bullish and/or bearish positions without warning and these may change without warning.

The real purpose of these notes is to help me understand why I make the moves I make. Looking back I hope to understand what worked and what didn't. Life is a real learning experience with real money, real bodies, real consequences, and real rewards.

I may be head faked, but too many bears too fast

2006-03-10T12:03:00.000-08:00

My current Rydex position is, after shifting to a slightly more market bullish posture tonight:

DIA: RYCWX (2v) 100%, RYCVX (2^) 0%
S&P: RYTPX (2v) 57%, RYTNX (2^) 43%
QQQQ: RYVNX (2v) 68%, RYVYX (2^) 32%

If I hadn't run out of time, I would have shifted the RYCWX along the lines I went on the RYTPX. It isn't clear, but I think a little bitty rally could happen here. COULD is operative. I am not sure.

1) Too many are quickly jumping in the bear camp.
2) Look at a chart of the $RHNDX, notice the Record high percentage was just near 0! When this happened in September 2005 and February 2006, a 3% rally followed in the NASDAQ 100. A 3% rally would cause a 6% decline in RYVNX! OUCH!!!!

So I am moving to a more neutral position to avoid losses. I will let my other long positions work to capture the gains. I will be surprised, if I am not shifting to a more bearish position in 7 trading days more or less.

As always do your own due diligence and make your own decisions. No one knows for certain what tomorrow will bring. Only you can be responsible for your own decisions. I may hold bullish and/or bearish positions without warning and these may change without warning.

The real purpose of these notes is to help me understand why I make the moves I make. Looking back I hope to understand what worked and what didn't. Life is a real learning experience with real money, real bodies, real consequences, and real rewards.

Bearish, but wavering very short term!

2006-03-10T10:18:00.000-08:00

I have become fairly bearish. I am still holding many long term bullish positions, but have moved all my Rydex positions to bearish positions with the 200% inverse funds. I am closely watching and could be moving towards neutral or bullish very soon, maybe even today.

Currently as a % of total portfolio:
RYVNX 11.6%
RYTPX 3.2%
RYCWX 1.8%

I have an idea mid April could deliver $SPX 1230-1180. This could well present a buying opportunity. Most will be screaming SELL, SELL, SELL!!!! And when everything looks blackest, buyers are often rewarded! But, I will be looking at a lot of other indicators to see, if I think buying is warranted.

My October 20, 2005 post describes some of these.

I am fairly bullish on the oil sector right now! Only about 40% of the charts are bullish. The last 2 times the percentages were that low, were great buying opportunities!

And short the USD via:
RYWBX 2.3% This has been a painful position. And as the USD has broken a 3 year bear trend is very questionable.

Cash 9%

Best of luck to you!

As always do your own due diligence and make your own decisions. No one knows for certain what tomorrow will bring. Only you can be responsible for your own decisions. I may hold bullish and/or bearish positions without warning and these may change without warning. This is only a small part of my investment portfolio.

I have divergent indications, but am moving short term bearish

2006-02-17T11:46:00.000-08:00

An indicator with an 86% accuracy record at signaling buys in the past 7 years says the S&P is a buy!

But there are numerous key resistance levels that must be taken out to go higher. I am assuming a short term failure is slightly more likely than a success. Therefore I am going to a mildly bearish posture on my Rydex positions.

I should have about 45% bullish 55% bearish balance with a much larger percentage tied to the QQQQ, followed by roughly equal amounts tied to the S&P and DIA.

Some of the raw notes I made in making this decision:
Nasdaq stalling at the top of the downturn channel.
DJIA stalling at a sloped resistance line.
Summation index turning up, bullish.
S&P stalling right on horizontal resistance.
NYSE record high percentage index at highs last seen in beginning 06 and in Sep 05!!
Divergence between NYSE ADV-DEC and NASD ADV-DEC.

Of course yesterday faked me out as I expected spinning tops in multiple indexes and that wasn’t to be.

Best of luck to you!

As always do your own due diligence and make your own decisions. No one knows for certain what tomorrow will bring. Only you can be responsible for your own decisions. I may hold bullish and/or bearish positions without warning and these may change without warning. This is only a small part of my investment portfolio.

okay, I am moving to only slightly bullish

2006-02-16T12:01:00.000-08:00

The DJIA, S&P, and the Nasdaq both are close to doing spinning tops today. The best news of the day, is that the NYSE is haaving a pretty good day. This was a big concern. A 5 day RSI model with a sell point of 50 is signaling sell, not a very good model, because it leaves you out on big run ups. I am not expecting a big run up. The S&P and Nasdaq is right at resistance. February 20 is Presidents' Day, a trading holiday.

Therefore I am moving to a much less bullish posture. I will have a 53% bullish, 47% bearish tommorrow. Depending on what happens tommorrow, another shift would not be unlikely. No clue to which way.

See prior disclaimers.

Whiplash resolved?

2006-02-15T20:04:00.000-08:00

The market feels likely to go a bit higher. I am not changing my positions, but will be watching for any sign of a crack. When the crack happens, it is likely to be brutal again. With options expiration this week, that is a concern. Another concern is the fact that the Nasdaq Composite and the New York Stock Exchange Indexes have had little rally as compared to the DJIA. These should come together soon and that may determine the direction. I would be surprised, if there is a lot of upside, but must play the cards as I see them.

Whiplash rally?

2006-02-08T11:53:00.000-08:00

I was really hoping to have 3-5 days more on the down side, as painful as it would be, to set up for a pretty good rally point. It appears that I will not get them at the moment.

I have shifted to 63% bullish, 37% bearish on my Rydex equity funds. Except for the smaller amount leveraged to the DJIA, I shifted to 100% bullish.

I will be surprised, if we don't peak in a several days. And I think it is possible we could continue the downward trend sooner.

I have a couple of indicators I use to make decisions along with a great flux of other information. They say shift, so I will shift. They are not without the ability to get it wrong or cause whiplash!

Best of luck to you!

As always do your own due diligence and make your own decisions. No one knows for certain what tomorrow will bring. Only you can be responsible for your own decisions. I may hold bullish and/or bearish positions without warning and these may change without warning. This is only a small part of my investment portfolio.

Pressing the bearish bet

2006-02-03T12:19:00.000-08:00

Pullbacks are normal and to be expected. Every few months except in the earliest part of a strong bull market, a pullback of a few percent should be expected. Will this turn into more than that. I have no idea. I would not be surprised to see a correction (10% or more) happen this year. And even that can happen without starting a new bear market. Only time will tell what will happen for sure!

I just added 1/3 to my RYVNX position. I am pressing my bets on this. Though, we COULD be near a bottom. Today has shown some recoveries from the low. The final hour may tell us more. Nothing suggests to me that we are near a "significant" bottom. Monday may be third down day and that will put a mite more caution in my thinking. There have been very hard snap back rallies at the beginning of December and January. These may be due to 401k, IRA, and other monthly funds entering the market. If that is the case, it appears we are past that point and the present decline would have been much worse without that money introduction.

The downside investments -12%: RYVNX –9%, RYTPX-2%, RYCWX-1%. The declining dollar investment – RYWBX -5%
Cash – 9%
A mutual fund that hedges against declines – HGSFX- 2%
Precious metal mutual fund – 1%
Other mutual funds – 26%
Equity positions-58%

Unlike many, the future of the market seems very unclear to me so far! Therefore, I must play the cards I see or FEEL. I am not at all sure I have objective data for the moves.

Best of luck to you!

As always do your own due diligence and make your own decisions. No one knows for certain what tomorrow will bring. Only you can be responsible for your own decisions. I may hold bullish and/or bearish positions without warning and these may change without warning. This is only a small part of my investment portfolio.

Still bearish

2006-02-02T12:41:00.000-08:00

Yesterday and today, I moved more cash to the bearish side, adding to RYVNX and RYTPX.

I have no real reason to suspect a big decline, but wouldn't rule out a pain causer!
We haven't seen any pain to speak of since September. I will now be watching when to flip towards bullish and in this market it could happen fast. But I think not so fast this time. If it does I ma have to buy some QQQQ to neutralize the bearish funds till I can flip them.

My portfolio looks like this at the moment:
Cash 10%
Double inverse bear market funds, primairly RYVNX 9%
Double inverse bear US Dollar funds, RYWBX 5%
Mutual Funds 17%
Stocks 59%

In the stock and mutual funds, there is a weighting to oil/Natural gas(12%), gold/silver(11%), uranium(3%), and biotech(22%). Two of the mutual funds have the ability to go short the market.

In some respects my portfolio could be viewed as being closer to a 25% or greater cash position.

This years gains, have exceeded last years and I want to protect some, but conitnue to participate in the rally, if it continues.

Unlike many, the future of the market seems very unclear to me so far! Therefore, I must play the cards I see or FEEL. I am not at all sure I have objective data for the moves.

Best of luck to you!

As always do your own due diligence and make your own decisions. No one knows for certain what tomorrow will bring. Only you can be responsible for your own decisions. I may hold bullish and/or bearish positions without warning and these may change without warning. This is only a small part of my investment portfolio.

Moving bearish here

2006-01-31T03:43:00.000-08:00

Sorry, posts are few and far between.

I have closed all Rydex positions that suggest the market might go up. Each day I add to the downside play. Primairly in the RYVNX as it is the most volatile.

RYTPX 500 -2x
RYVNX QQQ -2x
RYCWX DIA -2X

My portfolio looks like this at the moment:
Cash 14%
Double inverse bear market funds, primairly RYVNX 6%
Double inverse bear USDollar funds, RYWBX 5%
Mutual Funds 17%
Stocks 57%

In the stock and mutual funds, there is a heavy weighting to oil, natural gas, gold, uranium, silver, and biotech. Two of the mutual funds have the ability to go short the market.

In some respects my portfolio could be viewed as being closer to a 25% or greater cash position.

This years gains, have exceeded last years and I want to protect some, but conitnue to participate in the rally, if it continues.

Unlike many, the future of the market seems very unclear to me so far! Therefore, I must play the cards I see or FEEL. I am not at all sure I have objective data for the moves.

Best of luck to you!

As always do your own due diligence and make your own decisions. No one knows for certain what tomorrow will bring. Only you can be responsible for your own decisions. I may hold bullish and/or bearish positions without warning and these may change without warning. This is only a small part of my investment portfolio.

Report Card and a Little Action

2006-01-19T22:00:00.000-08:00

I have been very busy with other things and have found little time to post. I have been doing some trading of the Rydex equity funds.

From November 15th to the end of the year, I had a gain of 8.58% for my Rydex equity strategy. This gives me a gain of 52% for the Strategy for 2005. This is only a small part of my portfolio. I started 2006 by going to a 3.86% loss on the Rydex trading strategy.

Going into yesterday, I had moved completely out of the Rydex bullish funds and was 100% in the bearish funds. I had committed to adding to the bearish fund until the market broke or I could withstand no more pain.

On yesterday's drop, which in my opinion moved a number of indexes near support, whtich I think has some strength, I moved to an 80% bullish, 20% bearish posture at the end of the day on the 18th. After the recovery today, I added to my RYVNX position to start moving back to a neutral posture.

It is my intend, unless the market convincingly breaks through the highs, to gradually shift back to a bearish position over a few days. I am very unsure whether the market can find the strength to breakout.

The only good news, is there is so so much bad news out there and the market is holding up well.

As for my Rydex funds, I am very near being profitable for the year. Other than the Rydex funds, I am having a spectacular year and am close to surpassing last years gains.

Unlike many, the future of the market seems very unclear to me so far! Therefore, I must play the cards I sse.

Best of luck to you!

As always do your own due diligence and make your own decisions. No one knows for certain what tomorrow will bring. Only you can be responsible for your own decisions. I may hold bullish and/or bearish positions without warning and these may change without warning. This is only a small part of my investment portfolio.

A break in the uptrend. It had to happen, now what

2006-01-12T20:48:00.000-08:00

I really am to busy to know now what! The first bit of a pullback may be constructive for prep for a move higher. But it can roll over so quick from there to being downright nasty.

I have moved totally out of the RYTNX and RYCVX. Moved into their bear market counterparts. At mose I have 28% in RYVYX with the 72% in RYVNX,

Time will tell, if this is a serious downward move or just a reaction to some overly strong gains.

Little will surprise me.

As always do your own due diligence and make your own decisions. No one knows for certain what tomorrow will bring. Only you can be responsible for your own decisions. I may hold bullish and/or bearish positions without warning and these may change without warning. This is only a small part of my investment portfolio.

the market keeps acting like all systems go

2006-01-09T18:27:00.001-08:00

and the hair on the back of my neck doesn't like it!

I am bit of a contrarian. I am shifting more and more into the bear market side, even though it is a losing position. Only a few percnet of my portfolio. I don't have time to give %'s of where I am at.

The gains on the rest overshadow this position I am preparing for a correction some day. We will see what I do when this position starts to feel painful. I have felt that pain before, but smiled when the correction arrived.

I have no reason to think or act like a correction could happen at any time. I wouldn't be surprised to seem momentum carry us higher, possibly much higher.

As always do your own due diligence and make your own decisions. No one knows for certain what tomorrow will bring. Only you can be responsible for your own decisions. I may hold bullish and/or bearish positions without warning and these may change without warning. This is only a small part of my investment portfolio.

All I can say is WOW!!!!!!!

2006-01-06T22:23:00.000-08:00

An impressive start to the year!

These are 2 charts I look at when thinking about where the market is going. NYA
As I look at this second chart, Record High NYA
I observe that when the record high's drop below 20, there is usually a sustained period of record highs. In the November rally, we didn't get that reward, even though it was a good rally. Therefore, I wonder if the rally really has more to go? There will be rough spots though.

Looking at the NYA, the 4 day rally of 3.6% is the 278 highest of 10068 periods examined. Six gains in that period exceeded 10%. Ninety gains in that period exceeded 5%. So this years gains to date are not in "Never Never Land!"

Four day NYA gains greater than 2.44% and between Jan 3 and Jan 10th: 1967-3%, 1973-2.7%, 1974-2.6%, 1975-6.4%. 1976-4.5%, 1979-3.3%, 1980-3.9%, 1983-4.9%, 1984-2.7%, 1985-2.7%, 1987-5.7%, 1988-5.7%, 1990-2.7%, 1992-3%, 1999-2.8%, 2000-4.5%, 2003-5.4%, 2006-3.6%

Looking at how the month of January and the year performed in these cases:
2003 month - bad, year - very good,
2000 month - very bad, year - very good, wild year,
99 month - very good, year - very good,
92 month - bad, year - good,
90 month - very bad, year - bad, wild year,
88 month - very good, year - very good,
87 month - very good, year - neutral wild year,
85 month - very good, year - very good,
84 month - neutral, year - neutral,
83 month - very good, year - very good,
80 month - very good, year - very good,
79 month - very good, year - very good,
76 month - very good, year - good,
75 month - very good, year - very good,
74 month - very bad, year - very bad,
73 month - very bad, year - very bad,
67 month - very good, year - very good,

If the Fed should give a hint that it is not near through, the apple cart could easily be tipped. We are also at the beginnings of earnings season and it can always bring surprises. Things levered positively to oil, gas, coal may have some nice upside surprises. But energy dependent industries could provide challenges. The question there is how much hedging was in place?

We just had the Consumer Electronic Show to pump up that industry. Now comes Macworld, the auto show, and the homebuilders show. There are lots of cash rich balance sheets that could drive some continued M&A plus stock buybacks. But companies are adding pension accounting and stock option expensing into the reports. I just read the EMR - Emerson Electric report and was impressed with how they dealt with the pension accounting. Of course we will have some more surprises as companies tangle with their accountants and the Sarbanes Oxley morass.

Furthermore we have Iran, Israel, Washington corruption, Iraq, oil, gas, and avian flu among the wild cards.

We do live in interesting times!

My current Rydex position is, after shifting to a slightly bearish posture tonight:

25% - DIA: RYCWX (2v) 65%, RYCVX (2^) 35%
25% - S&P: RYTPX (2v) 40%, RYTNX (2^) 60%
50% - QQQQ: RYVNX (2v) 60%, RYVYX (2^) 40%

The S&P is the result of a mistake, that has worked well for me last couple days, but I will be shifting it more bearish. I think there is a chance market can go up, but I am cautious. This is a small part of a portfolio and is intended to provide some downside protection and at times to capture upside gains.

To show what this means, 25% the proportion of the Rydex equity funds I have leveraged to the Diamonds.

RYCWX, the 2v is my shorthand to show this fund will GO UP TWICE AS FAST AS THE DIA GOES DOWN! 65% the proportion of the 32% leveraged to the BEARISH side.

RYCVX, the 2^ is my shorthand to show this fund will GO UP TWICE AS FAST AS THE DIA GOES UP! 35% the proportion of the 32% leveraged to the BULLISH side.

As always do your own due diligence and make your own decisions. No one knows for certain what tomorrow will bring. Only you can be responsible for your own decisions. I may hold bullish and/or bearish positions without warning and these may change without warning. This is only a small part of my investment portfolio.

Fed and Retail

2006-01-03T12:03:00.000-08:00

I think we are going to make another run at Dow 11k. Therefore I have moved to about a 70% bullish posture. I had hoped to have a couple down days, but I am not going to get one today.

Unclear how much legs the rally really has. They might fall out tommorrow, but I don't want to be left behind.

Whiplash in effect.

The market seems to like the Fed notes. Heard something about strong retail. Plus this week we have CES, which could boost technology.

As always do your own due diligence and make your own decisions. No one knows for certain what tomorrow will bring. Only you can be responsible for your own decisions. I may hold bullish and/or bearish positions without warning and these may change without warning.

And the SMH will lead them lower!

2005-12-30T11:57:00.000-08:00

Sorry, I have been delayed in writing posts, fighting a cold and have been rather busy.

I think the market has more downside. Maybe not a lot and a surprising rally would not surprise me in the near future. Only time will tell.

I just added to my bearish RYVNX position, a bit late possibly time will tell. I also transferred out of the RYCVX, RYTNX, and RYVYX into the RYCWX, RYTPX, and RYVNX. The charts of all appear to have topped and are breaking down. The SMH seems to be leading the market lower and its fall seems to show that the support points that are close for the QQQQ, DIA, and SPY may not hold up.

Recall, this is still only a fraction of the holdings I have and is somewhat intended to buffer the other funds and stocks.

As always do your own due diligence and make your own decisions. No one knows for certain what tomorrow will bring. Only you can be responsible for your own decisions. I may hold bullish and/or bearish positions without warning and these may change without warning.

I sure left the party early. Now am I getting trapped?

2005-11-28T14:25:00.000-08:00

I have been very busy lately and expect to be busy through most of December. Trades and updates will be sporadic. Tonight was the first trade on the Rydex equity funds since my last update here.

It is very clear that I left the rally party early and shifted to neutral. Now I am setting up for a mild correction. Possibly only a few days. I think it is possible we have another run at new highs, but we could also go into a serious correction.

I listened to Richard Arms (Arms Index/TRIN) and John Bollinger (Bollinger Bands)on CNBC today. It was interesting to observe two of the Deans of technical analysis have very divergent viewpoints on the present market condition. Arm's TRIN indicator suggests the market is more overbought than it has been in a few years. Bollinger on the other hand had little concern about the present market condition.

Robert Drach, who I put more stock in than most in the business issued a second sell taking his newsletter portfolio from 46% to 10% and now 7% cash. But his investment philosophy is quite different than most of the pundits and he has proven that you really only have to be in stocks for relatively short periods of times to beat the indexes and inflation.

I find though his methodology often leaves lots on the table. But it it very hard to argue with 96% profitable trades (1609/1675) since 1977 with annualized gains of 19 to 20% and holding periods of about 19 weeks.

The most encouraging thing for a market rally in my mind at the moment is there seems to be a lot of people looking for a correction. Maybe I am wrong and it won't happen.

Only time will tell. I have decided after perusing the matter to act like a mild correction will happen.

My current Rydex position is, after shifting to a slightly bearish posture tonight:

32% - DIA: RYCWX (2v) 60%, RYCVX (2^) 40%
35% - S&P: RYTPX (2v) 57%, RYTNX (2^) 43%
33% - QQQQ: RYVNX (2v) 56%, RYVYX (2^) 44%

To show what this means, 32% the proportion of the Rydex equity funds I have leveraged to the Diamonds.

RYCWX, the 2v is my shorthand to show this fund will GO UP TWICE AS FAST AS THE DIA GOES DOWN! 60% the proportion of the 32% leveraged to the BEARISH side.

RYCVX, the 2^ is my shorthand to show this fund will GO UP TWICE AS FAST AS THE DIA GOES UP! 40% the proportion of the 32% leveraged to the BULLISH side.

As always do your own due diligence and make your own decisions. No one knows for certain what tomorrow will bring. Only you can be responsible for your own decisions. I may hold bullish and/or bearish positions without warning and these may change without warning. This is only a small part of my investment portfolio.

Okay, I was shook out to soon! Diversification

2005-11-18T21:06:00.000-08:00

I am sitting with the Rydex equity portion of my portfolio in "molasses mode."

Even though, the pre-Thanksgiving days are likely to be bullish, I am staying somewhat sidelined at the moment.

If the market really breaks out, I will probably take some action. It will be late and I will have less gains.

I have a number of things going on for the next 3 weeks or so and may not have time to work with the market, Rydex Funds, and to post a lot.

PLEASE UNDERSTAND, This Rydex equity trading strategy is only a part of a diversified investing process. I also have mutual funds and stocks I rarely touch. I have stocks that are frequently traded.

Most people view diversification in only two or three dimensions. My thesis is diversification has many dimensions and exploiting more than the sector, market cap, and location dimensions may help one increase gains, while reducing risks. What are some of these other dimensions? Price, Time, Quality, and Beta.

I just posted a link to a great blog on the right, The Real Returns, This blog focuses on mutual funds and value oriented investing.

As always do your own due diligence and make your own decisions. No one knows for certain what tomorrow will bring. Only you can be responsible for your own decisions. I may hold bullish and/or bearish positions without warning and these may change without warning.

3.86% & I am protecting profits!

2005-11-15T11:44:00.000-08:00

I just checked my gain for the month to date on this strategy and it is 3.86%! The market is at a critical point, It needs to break through resistance, it has been toying with it. I think it is likely the mouse escapes the cat at least temporarily. We will see on whether the market has another pull back and try this year. I suspect it might. And the market might make it through resistance. I just don't want to give back much when I don't need to take the risk to have a good month.

Therefore I sold for cash 38% of my position in the Rydex account and rearranged my portfolio to just slightly bullish. I probably should have done this earlier, but wanted to give the market a bit more chance. Unless the market turns up in the last hour I will give up some of the 3.86%.

My current Rydex position is, after shifting to a slightly more market conservative posture tonight:

32% - DIA: RYCWX (2v) 45%, RYCVX (2^) 43%
47% - S&P: RYTPX (2v) 46%, RYTNX (2^) 54%
21% - QQQQ: RYVNX (2v) 36%, RYVYX (2^) 64%

To show what this means, 13% the proportion of the Rydex equity funds I have leveraged to the Diamonds.

RYCWX, the 2v is my shorthand to show this fund will GO UP TWICE AS FAST AS THE DIA GOES DOWN! 9% the proportion of the 26% leveraged to the BEARISH side.

RYCVX, the 2^ is my shorthand to show this fund will GO UP TWICE AS FAST AS THE DIA GOES UP! 91% the proportion of the 26% leveraged to the BULLISH side.

The reason why I have a balance between, a fund that goes up and a fund that goes down is to lower the risk of a move opposite of where my investments are. If I pull money out or the Rydex funds, I get hit with a short term charge, though I think it is modest.

As always do your own due diligence and make your own decisions. No one knows for certain what tomorrow will bring. Only you can be responsible for your own decisions. I may hold bullish and/or bearish positions without warning and these may change without warning.

Rally on??????

2005-11-13T20:58:00.000-08:00

No Rydex changes since the last report.

DJIA - The 10700 area has turned back advances multiple times this year. It may be different this time. Though we may hesitate and even retrace before climbing over this. Then again maybe the rally fails. I am staying long for now and not even looking for the door to get out. Of course I can and will whiplash in a moment. Some of what I see in the Wilder's ADX chart is promising.

QQQQ - Skies not seen since early 2002 are above us! If the DJIA and the S&P join the QQQQ's the rally could have a ways to go. The PE's may be lower in many areas than they were when the charts hit bottom in 2002 & 2002. I am cautiously bullish.

S&P 500 - The S&P is visiting an area that has repelled it a couple times this year.
Will we make it?

Something to think about!
If GP - Georgia Pacific is worth a 37% premium to its present share price, isn't WY, KMB, and IP worth a premium to their present prices? http://finance.yahoo.com/q/co?s=GP

Could we be ready to start a new run of mergers? If so the market could turn hot!

To have a convincing rally, we do need the volume to grow though.

I will be the first to admit, I don't know what will happen. Those who think they do continue to amaze me.

As always do your own due diligence and make your own decisions. No one knows for certain what tomorrow will bring. Only you can be responsible for your own decisions. I may hold bullish and/or bearish positions without warning and these may change without warning.

The day seems healthy, but.......

2005-11-07T12:02:00.000-08:00

The volume is very low, the relative strength is trying to round, +DI in Wilder's ADX is flattening, the ADX line isn't rising. None of these things say the rally won't continue, but it raises some concerns.

We could well continue up, but I am going to be a bit more conservative till the rally proves it is still alive and healthy.

Therefore I am selling 50% of my RYTNX position for cash and taking 29% from the RYVYX position and transferring it to the RYCVX. This takes about 11% out of these positions. My thinking is the RYCVX leveraged to the Dow will be less volatile than the RYVYX leveraged to the NASDAQ.

My current Rydex position is, after shifting to a slightly more market conservative posture tonight:

26% - DIA: RYCWX (2v) 9%, RYCVX (2^) 91%
45% - S&P: RYTPX (2v) 13%, RYTNX (2^) 87%
29% - QQQQ: RYVNX (2v) 11%, RYVYX (2^) 89%

To show what this means, 13% the proportion of the Rydex equity funds I have leveraged to the Diamonds.

RYCWX, the 2v is my shorthand to show this fund will GO UP TWICE AS FAST AS THE DIA GOES DOWN! 9% the proportion of the 26% leveraged to the BEARISH side.

RYCVX, the 2^ is my shorthand to show this fund will GO UP TWICE AS FAST AS THE DIA GOES UP! 91% the proportion of the 26% leveraged to the BULLISH side.

The reason why I have a balance between, a fund that goes up and a fund that goes down is to lower the risk of a move opposite of where my investments are. If I pull money out or the Rydex funds, I get hit with a short term charge, though I think it is modest.

As always do your own due diligence and make your own decisions. No one knows for certain what tomorrow will bring. Only you can be responsible for your own decisions. I may hold bullish and/or bearish positions without warning and these may change without warning.

A slightly bullish churning day

2005-11-04T22:25:00.000-08:00

No change in Rydex equity positions.

Today’s break from moving rapidly up feels bullish. The market hesitated, considered a trip to the red to leave more concern over the weekend, and then rewarded us with a slightly green close. This doesn’t say we won’t go down.

On another matter, the US Dollar Index hit the highest point since May 2004. USD Index A rising US Dollar may threaten the US’s already weak export posture. The good news is it may help with oil prices and imports. This rise suggests that Greenspan is having an effect. The bad news is Greenspan normally puts on the brakes till someone goes through the windshield.

I have been short the USD for some time via a 2x Rydex fund – RYWBX. This is clearly a painful position, but I intend to hold for a bit longer.

Please do not consider this as a recommendation for you or anyone you know to trade these funds or in this matter. As always do your own due diligence and make your own decisions. No one knows for certain what tomorrow will bring. Only you can be responsible for your own decisions. I may hold bullish and/or bearish positions without warning and these may change without warning.

October report card

2005-11-03T12:02:00.000-08:00

Recall on October 20th, I stated the market might have put a bottom in!

The tea leaves may be ready to sprout a rally

I still think so. I was not the earliest to conclude the bottom was in, but I was earlier than many market timers. I am seeing information from timers just turning bullish now. We are still likely to see some volatility and possibly even a test of the bottom. More likely we will just tread some water and scare folks.

Assuming we close the market green today, even though we have given back much from the daily highs raises confidence in the rally.

October was a good month for my strategy of using the Rydex funds. The index funds all lost money and I managed to eke out a 2.1% gain. The beauty of gains is they compound.

	SPY	DIA	QQQQ	Micro
March	-1.8%	-2.4%	-1.7%	5.4%
April	-1.9%	-2.9%	-4.4%	10.3%
May	3.2%	3%	8.8%	8.7%
June	0.1%	-1.7%	-3.3%	1.7%
July	3.8%	3.9%	7.6%	3.4%
August	-0.9%	-1.3%	-1.5%	0.4%
September	0.8%	1.0%	1.2%	8.9%
October	-2.4%	-1.7%	-1.5%	2.1%
Compounded	0.8%	-2.4%	4.5%	46.2%

During the month I made exchanges of the funds on 10 different daye. A total of 26 fund exchanges. Often these are little tweaks. There is NO CHARGE for doing this at the broker I use, since I do exchanges rather than withdrawals.

I still left lots of potential money on the table, but prefer to control risk.

There are no guarantees that Rydex or the Profunds equivalent will achieve their goals. But they are pretty good at it.

Just as this strategy can provide lots of upside, it can provide lots of downside, if you are leveraged on the wrong side of the market. My goal is to not make perfect trades, just make more trades with more positive impact to my balance than negative impact. As I write this, I am slightly on the wrong side of the market and must face my daily decision.

Micro's comments on AVI Biopharma (NASDAQ: AVII)

Please do not consider this as a recommendation for you or anyone you know to trade these funds or in this matter. As always do your own due diligence and make your own decisions. No one knows for certain what tomorrow will bring. Only you can be responsible for your own decisions. I may hold bullish and/or bearish positions without warning and these may change without warning.

Climbing on up! Still may hit a roughish spot

2005-11-02T13:08:00.000-08:00

I shifted my Rydex equity position to an almost fully bullish stance. I was a bit slow in doing this and may see a painful day on this, but I will chance it. We may see some roughish spots as we take out lines of resistance.

I think if the market goes up and I expect it to, we will see people jump on board for a Q4 rally.

My current Rydex position is, after shifting to a slightly more market bullish posture tonight:

13% - DIA: RYCWX (2v) 17%, RYCVX (2^) 83%
37% - S&P: RYTPX (2v) 10%, RYTNX (2^) 90%
50% - QQQQ: RYVNX (2v) 10%, RYVYX (2^) 90%

To show what this means, 13% the proportion of the Rydex equity funds I have leveraged to the Diamonds.

RYCWX, the 2v is my shorthand to show this fund will GO UP TWICE AS FAST AS THE DIA GOES DOWN! 17% the proportion of the 13% leveraged to the BEARISH side.

RYCVX, the 2^ is my shorthand to show this fund will GO UP TWICE AS FAST AS THE DIA GOES DOWN UP! 83% the proportion of the 13% leveraged to the BULLISH side.
The reason why I have a balance between, a fund that goes up and a fund that goes down is to lower the risk of a move opposite of where my investments are. If I pull money out or the Rydex funds, I get hit with a short term charge, though I think it is modest.

As always do your own due diligence and make your own decisions. No one knows for certain what tomorrow will bring. Only you can be responsible for your own decisions. I may hold bullish and/or bearish positions without warning and these may change without warning.

Can we break the resistance?

2005-10-31T13:24:00.000-08:00

Please read the October 20th post, as why I am bullish now.
I think the market is still struggling with the resistance lines. The good news is the close today is much closer to those lines than the Friday close. Therefore a push to get across them is easier. Will it happen this time, I am a bit skeptical. The market hit a high around 3:30 and sold off some on a bit higher volume. The market is still uneasy in my mind.

But I still believe the bottom is most likely in! I still have some powder dry, but would like to make sure I don't miss much of what I think has a likely potential to be a very nice run up. I could be very wrong on this!

The good news is that support is not far below the market, if I am wrong. But swings can be very violent with the support and resistance so close together.

My current Rydex position is, after shifting to a slightly more market bullish posture tonight:

13% - DIA: RYCWX (2v) 17%, RYCVX (2^) 83%
37% - S&P: RYTPX (2v) 17%, RYTNX (2^) 83%
50% - QQQQ: RYVNX (2v) 24%, RYVYX (2^) 76%

To show what this means, 13% the proportion of the Rydex equity funds I have leveraged to the Diamonds.

RYCWX, the 2v is my shorthand to show this fund will GO UP TWICE AS FAST AS THE DIA GOES DOWN! 17% the proportion of the 13% leveraged to the BEARISH side.

RYCVX, the 2^ is my shorthand to show this fund will GO UP TWICE AS FAST AS THE DIA GOES DOWN UP! 83% the proportion of the 13% leveraged to the BULLISH side.
The reason why I have a balance between, a fund that goes up and a fund that goes down is to lower the risk of a move opposite of where my investments are. If I pull money out or the Rydex funds, I get hit with a short term charge, though I think it is modest.

As always do your own due diligence and make your own decisions. No one knows for certain what tomorrow will bring. Only you can be responsible for your own decisions. I may hold bullish and/or bearish positions without warning and these may change without warning.

AVI Biopharma (NASDAQ: AVII)

2005-10-30T21:19:00.000-08:00

Please see my comments at: http://themicrokidstocks.blogspot.com/

feeling better, but locking in a touch of profit on the Diamonds

2005-10-24T11:38:00.000-07:00

Please read the October 20th post, as why I am bullish now.

My current Rydex position is, after shifting away from 100% in RYCVX at market close tonight:

13% - DIA: RYCWX (2v) 17%, RYCVX (2^) 83%
37% - S&P: RYTPX (2v) 34%, RYTNX (2^) 66%
50% - QQQQ: RYVNX (2v) 35%, RYVYX (2^) 65%

To show what this means, 13% the proportion of the Rydex equity funds I have leveraged to the Diamonds.

RYCWX, the 2v is my shorthand to show this fund will GO UP TWICE AS FAST AS THE DIA GOES DOWN! 17% the proportion of the 13% leveraged to the BEARISH side.

RYCVX, the 2v^ is my shorthand to show this fund will GO UP TWICE AS FAST AS THE DIA GOES DOWN UP! 83% the proportion of the 13% leveraged to the BULLISH side.
The reason why I have a balance between, a fund that goes up and a fund that goes down is to lower the risk of a move opposite of where my investments are. If I pull money out or the Rydex funds, I get hit with a short term charge, though I think it is modest.

I currently have 9% of my portfolio devoted to Rydex trading in this manner. By balancing bull and bearish positions, I am currently at only 3.1% of my portfolio that is exposed to moving twice as fast as an index.

Some of you may wonder why, I don't have more exposure to this strategy? The answer is simple, I want to control risk! And in this case, I am clearly trading off returns to control the risk. As I become more comfortable with using these funds, I may decide to increase this as a part of my portfolio, but for now I am comfortable with where I am at. I control risk by having a diversified portfolio and limiting investments in any category.

It is great when you see the market has moved 1% and your funds have moved 2%, but there is also the case where the market moves 1% up and your funds move 2% down. At present, I prefer to accept a lower return to reduce the possibility of a strong negative move.

As always do your own due diligence and make your own decisions. No one knows for certain what tomorrow will bring. Only you can be responsible for your own decisions. I may hold bullish and/or bearish positions without warning and these may change without warning.

Interim reality check on the month

2005-10-21T21:03:00.000-07:00

My Rydex leveraged index fund trading strategy is up 1.47% month to date. Doesn't sound to bad for a month where the Dow is down 4%, S&P down 3.4%, and QQQQ down 2.3%. On the other hand, if I had understood how ugly October would have been and just mover everything into the leveraged DJIA bear market fund. If I had taken these funds and made an investment in only RYCWX, it would have provided an 8% return!

On the other hand, if I had just bought an index fund at Vanguard for the S&P 500, I would be down about 3.4%. And if I had been bullish, for this period and invested all in the 2X leveraged fund rising as the index rises, I would be down 6.8%!

Okay, I left lots of money on the table, but I protected and grew my money unlike an index fund strategy. The strategy I use is to normally keep between 0 and 2/3 of the fund in these accounts exposed to 2 times the index. Looking at the 1.47% month to date, if I can average do this every month, doing this 12 times gives a compounded return of 19%. When I realize this is a return for 2/3 rds of the month, it compounds to 28% in a year.

Therefore I am happy with 1.47% for this period! And the compounding demonstrates the importance of keeping money out of harm's way!

So far this month, I have made exchanges of funds on 7 days. Normally I move money from 3 funds to 3 funds on these days. There are no costs for these exchanges at TDWaterhouse, the broker I use, or at Rydex Funds. One disadvantage of using TDWaterhouse for this is the cutoff time is 3 pm.

As always do your own due diligence and make your own decisions. No one knows for certain what tomorrow will bring. Only you can be responsible for your own decisions. I may hold bullish and/or bearish positions without warning and these may change without warning.

so far so good

2005-10-21T11:43:00.000-07:00

Today I sold all RYCWX the bearish Dow fund and moved proceeds to RYCVX the bullish Dow fund. Both leveraged at 2x.

65% Bullish on the 2x S&P and QQQQ funds.

Roughly 50% on the QQQQ, 36% S&P and 14% on DJIA.

As always do your own due diligence and make your own decisions. No one knows for certain what tomorrow will bring. Only you can be responsible for your own decisions. I may hold bullish and/or bearish positions without warning and these may change without warning.

The tea leaves may be ready to sprout a rally

2005-10-20T10:06:00.000-07:00

As always, I have fallen behind in things I have to do and things I want to do.

Natural Gas, I think this is a buying opportunity and I have been adding to positions. I also added to CGMFX who makes heavy concentrated investments and was last seen as heavy in petroleum and housing. Sharp manager who has made me money!

I will probably be moving my Rydex positions today from slightly bearish to moderately bullish. Even when I have a bearish Rydex position, I typically have an overall bullish market posture. Maybe, I will be posting later what those positions are.

DIA: RYCWX (2v) sell some, RYCVX (2^) buy some
S&P: RYTPX (2v) sell some, RYTNX (2^) buy some
QQQQ: RYVNX (2v) sell some, RYVYX (2^) buy some

(2v) Means it goes up twice as fast as the index goes down and goes down twice as fast as the index goes up.

(2^) means it goes up twice as fast as the index goes up and goes down twice as fast as the index goes down.

Why the change? I think the bottom is probably in! We may retest it, but I think we are near it. My primary concern is that there is a lot of congestion between limits to the trend lines and lots of support and resistance around the averages.

But there are some strong positive technical indications for a rally.
1) Q4 is traditionally a strong quarter.
2) NY Stock Exchange Record High Percentage Indicator spiked down to near zero! This has happened 3 times in past 2.5 years: October 2002, May 2004, and October 2005.

There are other lows in the area of 10. Feb 2003 and March 2003, which led to a giant rally. April 2004 which would lead to a 1% ish drop, prior to the May rally of
1% or a touch more. August 2004 which was the signal of a 15% ish rally.

These are eyeball %'s folks, so don't get excited, if you come up with different numbers. This indicator really seems to favor a lot more reward than risk.

3)The Bullish Percentage Indicator just made a nice dip. It has only done this with rallies at hand in the past 30 months.

4) The 14 day RSI just made a nice dip into oversold territory. Rallies tend to only start with low RSI's. But low RSI's aren't really sufficient to signal a bottom.

5) The Ultimate Oscillator just made a nice dip to below 30 and that is a signal that the start of a rally may be close.

6) The Put/Call ratios have been favoring puts, this usually happens before the market is ready to turn up, but again this alone is not sufficient to signal a market bottom.

7) Robert Drach, who is one of the best market timers, in my opinion, just signaled a buy. His statistical method based on historical stock movement and various ancillary indicators seems to work over and over. He has a demonstration portfolio at http://www.nbr.com/drach/. Over the last 10 years, has an annualized return of over 20% without a loosing year. Though he often holds out of favor stock for substantial amounts of time, it is hard to argue with the results. All the trades are there, if you click on model portfolio. The buy was in his newsletter portfolio. There is a summary I wrote a year ago or so, of his methodology at http://members.aol.com/eartifacts/GAS/drachsum.html.
He subscribes to the two rules of investing. # 1 Never knowingly place money in harms way. # 2 Never forget rule #1."

In investing there is always the potential of putting money in harms way, but the goal of every investor has to be to control the risk.

There are I am certain other indicators showing the market is in trouble. I am just letting you know my thinking.

Good Luck!

As always do your own due diligence and make your own decisions. No one knows for certain what tomorrow will bring. Only you can be responsible for your own decisions. I may hold bullish and/or bearish positions without warning and these may change without warning.

Rydex, Meander To The Sidelines!

2005-10-07T11:51:00.000-07:00

I have moved my Rydex position as follows:
DIA: RYCWX (2v) 55%, RYCVX (2^) 45%
S&P: RYTPX (2v) 55%, RYTNX (2^) 45%
QQQQ: RYVNX (2v) 55%, RYVYX (2^) 45%

Just a little run to get near the sidelines! I think the market is ready to bounce and run to the upper line of the down channel, but it is not running yet. This position offers little protection to other funds I have, but will give me little Rydex losses in case we spike up. I expect another adjustment on Monday, but right now in my mind the market must prove itself again. As the market proves itself the plan is to lose a little bit. If this wasn't an October Friday with a lot of nasty things happening, I would have made a shift to a mildly bullish stance.

As always do your own due diligence and make your own decisions. No one knows for certain what tomorrow will bring. Only you can be responsible for your own decisions. I may hold bullish and/or bearish positions without warning and these may change without warning.

Rydex , Micro's Report Card

2005-10-07T09:19:00.000-07:00

For the past few days, I have been discussing specific trades I have been making using Rydex funds leveraged to 200% of an index or its inverse. I have been using these to a small extent for 21 months. There are no fees at Rydex for making these rapid trades. At TD Waterhouse, there is only a fee if I withdraw money from the Rydex fund family on a short term basis. Therefore I only move money back or forth or add. I have been adding as I become more comfortable with this technique. Other brokers will have different policies.

The beauty of index investing is the removal of specific equity or sector risk from investing. The goal with funds such as this is to lower the time risk and to be leveraged primarily in the direction the market is moving.

A review of how well, this has worked in my case. These results assume placing a fixed amount of dollars in the fund family and no withdrawals. Seventy exchanges were mad over this time period. Typically, if one set of funds is exchanged, I exchange all three.

	SPY	DIA	QQQQ	Micro
March	-1.8%	-2.4%	-1.7%	5.4%
April	-1.9%	-2.9%	-4.4%	10.3%
May	3.2%	3%	8.8%	8.7%
June	0.1%	-1.7%	-3.3%	1.7%
July	3.8%	3.9%	7.6%	3.4%
August	-0.9%	-1.3%	-1.5%	0.4%
September	0.8%	1%	1.2%	8.9%
Compounded	3.2%	-0.6%	6.1%	45.3%

In my case I only captured 16% gain. The reason for this was one early withdrawal and significant increases (Added 3 times the initial capital) in the July, August September time frame.

There are no guarantees that Rydex or the Profunds equivalent will achieve their goals. But they are pretty good at it.

Just as this strategy can provide lots of upside, it can provide lots of downside, if you are leveraged on the wrong side of the market. My goal is to not make perfect trades, just make more trades with more positive impact to my balance than negative impact. As I write this, I am slightly on the wrong side of the market and must face my daily decision.

Please do not consider this as a recommendation for you or anyone you know to trade these funds or in this matter. As always do your own due diligence and make your own decisions. No one knows for certain what tomorrow will bring. Only you can be responsible for your own decisions. I may hold bullish and/or bearish positions without warning and these may change without warning.

Micro-tary, Reading the tea leaves

2005-10-06T22:07:00.000-07:00

On September 21, I wrote: "The case for a sidewise or a bearish move is setting up."

In a sideways or bearish movement, we will probably see 3-5% movements from the bottom of the channel to the bottom of the channel. At that point, we were near the bottom of the channel. Today, we are also hopefully near the bottom of the channel.
If we drop through the bottom of the channel, another 3-5% could happen quite easily within 10 days or so. I think it is more probable we bounce near here and test the top of the channel 3-5% above the present level.

Until we break the top of that channel or significantly through the bottom I see the indexes in a slight downward channel. There are many events that could cause the market to move either way. In reality it is more the interpretation of the events, than the events themselves.

The percentage drop in the indexes in the past 3 days is not unusual over that amount of time. In the past 2 years this size and slope of drop has happened several times.
Twice this drop would not be a significant statistical event.

Realize that these interpretations are little more than reading tea leaves. In the process, I look at a number of technical indicators. Sometimes I draw lines every which way on the chart. Hopefully, the process gives me a slight advantage over a coin flip. Knock on wood! Each day I look at numerous and often contradictory judgments on the market condition. At some point in the process, I formulate my own thoughts and make my trading decision on the Rydex equity funds.

I expect very soon I will be racing to move from my current bearish posture on these to a neutral or a bullish posture. It is quite possible I will be making the first move in that direction today.

I have moved my Rydex position as follows DIA: RYCWX (2v) 63%, RYCWX (2^) 37%, S&P: RYTPX (2v) 73%, RYTNX (2^) 27%, QQQQ: RYVNX (2v) 80%, RYVYX (2^) 20%, Just a bit more bearish than yesterday and even more likely to be wrong.

(2v) Means it goes up twice as fast as the index goes down and goes down twice as fast as the index goes up.

(2^) means it goes up twice as fast as the index goes up and goes down twice as fast as the index goes down.

I was very happy today to see that my mutual fund portfolio was green! The contributors to the green were the RYCWX, RYTPX, RYVNX, HSGFX (fund that does some aggressive things to maintain stability and seems to do a good job of it) and the RYBIX (weakening dollar fund was a star, though I am still a bit red on it).

My Rydex equity gain for October is just over 1.5%. Unfortunately my energy intensive and relatively volatile portfolio has sunk back to late September levels.

As always do your own due diligence and make your own decisions. No one knows for certain what tomorrow will bring. Only you can be responsible for your own decisions. I may hold bullish and/or bearish positions without warning and these may change without warning.

Micro-tary, will the bottom of the sideways channel hold?

2005-10-05T12:16:00.000-07:00

Will the bottom of the sideways channel hold, is the question we are now facing. I have tweaked my Rydex position to 70% bearish 30% bullish, from 63% bearish 37% bullish. Just a slight and possibly dangerous course adjustment.

Any glimmer of promise and I will be moving back towards neutral. Just trying to capture a little bit on the swings. Also providing a bit of protection to long term positions in my portfolio.

This is 3rd down day for the DIA and SPY, but only 2nd down day for Nasdaq. If tommorrow is another heavy down hit, the DIA will lose support at 103.25 and the SPY at 119.75. The QQQQ's need to visit 38.00 to get past the most recent support. From here, that seems a challenge.

If we bounce, then we may get another chance to test for a channel top, about 3-5% above the channel bottom. When using the leveraged funds, the 3-5% becomes 6-10%. My goal is each swing to try to capture just a bit of that.

When trying to deal with these little quick swings, the exercise is largely anticipation oriented. Despite this, I examine numerous technical indictors to make a decision.

As always do your own due diligence and make your own decisions. No one knows for certain what tomorrow will bring. Only you can be responsible for your own decisions. I may hold bullish and/or bearish positions without warning and these may change without warning.

Micro-tary, This market just wants to frustrate!

2005-10-04T12:31:00.000-07:00

I have been gradually shifting towards a more neutral position as the market feels like it is failing in the rally. I think we will test the down side as we continue a sidewards movement. The market seems locked in a range of a few percent, typically the longer it stays in the range, the more interesting the exit will be.

If this rally really has failed, I am more interesting in the down side than the upside.

It may be that the market is recognizing that there will be third and fourth quarter pain based on energy. Especially natural gas.

I think if we lost just 5% of GOM production for the winter and have a relatively harsh winter, we will have issues in Feburary. There seems to be a lot of indications that the loss will be much more than that. If we have a mild winter, we might be able to take a 20% loss.

There is some elasticity in the supply demand curve for natural gas.

I have made moves on 9/29 and 10/3 to move towards a more neutral Rydex position with a slight bearish posture. Today, I have moved my Rydex funds to 37% bullish, 63% bearish. This will keep a move either way from hurting to bad in terms of this part of my portfolio.

Everything the market has done in the past couple weeks feels like a head fake. Overall, my portfolio is very happy with things at the moment, though.

I continue to increase a position in RYWBX. It goes up twice as fast as the US Dollar drops. This keeps going against me, but someday it will rebound!

As always do your own due diligence and make your own decisions. No one knows for certain what tomorrow will bring. Only you can be responsible for your own decisions. I may hold bullish and/or bearish positions without warning and these may change without warning.

Micro- tary: Don't trust, but not ready to fight trend.

2005-09-29T12:22:00.000-07:00

I have moved my Rydex position as follows DIA: RYCWX (2v) 22%, RYCVX (2^) 78%, S&P: RYTPX (2v) 35%, RYTNX (2^) 65%, QQQQ: RYVNX (2v) 40%, RYVYX (2^) 60%

(2v) means it goes up twice as fast as the index goes down and goes down twice as fast as the index goes up.

(2^) means it goes up twice as fast as the index goes up and goes down twice as fast as the index goes down.

I still think this little rally stalls at the high of the year, possibly next week. Then the next question would be whether the down trend stalls at the lows of September to continue what seems a sideways trend. The last two months of the year are traditionally strong, so maybe it stops near the September low. The cost of energy may change the year end rally though.

The oil and gas infrastructure has clearly suffered more damage than the market has realized. The natural gas report was encouraging, until you not that it only has 3 days of Rita in it. I expect next week report to have near a 0 BCF add, when it should have about 80 BCF add. But this industry can pull rabbits out of the hat and with the present nat gas prices there is every incentive to do so. Last year storage peaked at 3.3 TCF and the five year average is 3.1 TCF. Withdrawal typically starts November 11th. Last year the last 5 weeks of addition averaged 48 BCF. My storage estimate for when withdrawl starts is 2.9 TCF, well below last year and the average, but above the 2.7 TCF five year minimum. Of course if the weather gave us a slow start on winter, all could be well. The weather is such a fickle thing though.

Electricity cost, home heating, plastics cost, food processing, industrial processing - paper and many other things are a function of natural gas supply and cost.

Storage Report

As always do your own due diligence and make your own decisions. No one knows for certain what tomorrow will bring. Only you can be responsible for your own decisions. I may hold bullish and/or bearish positions without warning and these may change without warning.

I don't trust this upward movement in the indexes, BUT

2005-09-28T12:13:00.000-07:00

I must recognize that they aren't rolling over and falling. I still think we are in a sidewards channel, but if there is 2% to the top of that channel, a bearish position in the Rydex funds will lose 4%.

Therefore I have sold (exchanged) some Rydex funds and bought some others. No cost for the trades. 55% of the balance in the Rydex funds is now in RYCVX (DIA), RYVYX(QQQQ), RYTNX (S&P 500). Some of the bearish RYCWX (DIA), RYVNX (QQQQ), and RYTPX (S&P 500) were exchanged out of to accomplish this.

I still suspect any move upwards to be a head fake. But, if the mutual funds try to paint a real good close on the quarter in the next 2 days, I won't be hurt.

I currently have a portfolio weighted long, but with significant natural resource oriented stocks, though I have been selectively taking some profits in these. These should provide some protection against a market fall.

I continue to increase a position in RYWBX. It goes up twice as fast as the US Dollar drops. This keeps going against me, but someday it will rebound!

As always do your own due diligence and make your own decisions. No one knows for certain what tomorrow will bring. Only you can be responsible for your own decisions. I may hold bullish and/or bearish positions without warning and these may change without warning.

Micro-tary, The churn continues

2005-09-27T21:32:00.000-07:00

Even if we are in a sideways or down trending market, we will most likely have rallies of 2-4% and they will last 2-4 weeks. As can be seen in the charts, I think we are most likely in a sideways market in the QQQQ, SPY, and DIA (not shown.) The 40 DMA violations shown by the red circles suggest to me that a shift to a down trend is somewhat likely. There are other indications besides the 50 DMA providing cause for my concerns, among them September and October are often not the most favorable months. An up trend would not surprise me, but there are past highs to be put behind us for anything other than a very short term up move.

When I think we are in one of those mini rally modes, I will shift to a bullish position with my Rydex funds and try to capture a bit of the rally. If one could do this perfectly, the returns would be astounding. I ran a simulation, from June 2004 to June 2005, if a person was 2 days off on their trades, they could double every six months. Much better results were available for perfections and much worse results as a person is further away. It is very easy to lose money unless there is a strong market trend. In a sideways market, it may be possible, if a peak or valley is missed and one has the fortitude to not dump to wait for the next peak or valley. If one gets out of alignment with the market in a strong up trend or down trend losses can mount quickly. Diversification will temper many mistakes in investing. Currently I am allocating less than 10% of my portfolio to this Rydex trading strategy.

My trading of these funds will be far from perfection. My only goal is to get good returns from this portion of my portfolio and to provide some degree of perfection to other parts of my portfolio.

I currently have a portfolio weighted long, but with significant bearish exposure via stocks of oil, gold, and uranium companies. I also have bearish exposure via QQQQ puts, and Rydex funds including RYVNX, RYTPX, RYCWX, and RYWBX.

If the market should start to move up quickly, these positions will become painful quickly, as they will drop twice as fast as the market goes up. That doesn't scare me, because part of the function of having the Rydex Bear Funds is to protect other mutual funds when I think the market is weak. The reason for not selling these funds, is because they are closed. Examples of such funds in my portfolio include: BMCFX, NISVX, and WMCVX. They also balance some downside risk on stocks outside of my commodity oriented stocks.

As always do your own due diligence and make your own decisions. No one knows for certain what tomorrow will bring. Only you can be responsible for your own decisions. I may hold bullish and/or bearish positions without warning and these may change without warning.

Micro-tary, This market seems little closer to resolving itself

2005-09-26T13:16:00.000-07:00

The market really hasn’t moved on the milder than possible Rita damage. In reality, there may be some relatively severe damage in physical terms, though the loss of human life was limited.

1 major refinery off line for 2 weeks to a month.
2 or so refineries off line for a bit.
Essentially 1 week lost oil and gas production.
Half a dozen or more lost/damaged off shore drilling rigs.
1 Platform severe damage.
Other platform and undersea infrastructure remains an unknown.

Seems to me a lot bleaker than the commentators are making it out to be! Yes, it is great we didn’t lose Houston and/or Galveston, but we still have billions on dollars of damage.

We have another tropical depression brewing in the Caribbean, If it develops and threads the needle between Mexico and Cuba, the hurricanes may have another shot at are oil infrastructure.

I still think the most likely course for the market is sideways to downards. But a sideways market would expect that there would at some point be a short term rally of 2-3% on the indexes!

Still, I have accepted that there may be a little higher chance of a sideways market and moved 20% of my Rydex funds out of RYVNX, RYTPX, RYCWX and placed those funds in the corresponding long funds, RYVYX, RYTNX, RYCVX that go up twice as fast as the indexes. I do this rather than going to cash because it is a no charge switch. Rules and charges for trading Rydex funds vary from broker to broker. Essentially, I have reduced risk.

I also took some profits in some speculative junior oil and gas companies – TMR & SNG by selling 20% of what I had. I also added 50% to a JDSU position. I wouldn’t be surprised, if I took a quick gain on this.

I still have a portfolio weighted long, but with significant bearish exposure via stocks of oil , gold, and uranium companies.

As always do your own due diligence and make your own decisions. No one knows for certain what tomorrow will bring. Only you can be responsible for your own decisions. I may hold bullish and/or bearish positions without warning and these may change without warning.

Micro-tary, Is the market direction resolving itself

2005-09-21T12:21:00.000-07:00

The case for a sidewise or a bearish move is setting up. Doesn't mean it will happen or that it will be long or deep. It may be complicated with many mutual funds closing their reporting year at the end of September plus some quarterly window dressing, though I think this effect is smaller than most think.

The Fed's failure to show sufficient signs of deviating from the course it has set for a date with a future train wreck, does little to help raise confidence in the market. The unexpected strength of the USD does nothing to help the US's exporters. The hurricane(s) deficit's will make inflation more probable. The looming bankruptcy law enactment and the rising damage that energy costs is doing to the US consumer and business serve as a black cloud.

The market well may be supported by those companies benefiting from Katrina and Rita. Take those gains away and the market would look very red. There is a counterpoint and that is without Katrina and Rita business and the market would look fine.

Another way to look at this is the market started its rally in April. This gives us short term rally duration of about 5 months. That is long enough time to deserve a more significant rest. For reference the 2003 rally was roughly 4-5 months up, 1-2 months rest, 4-5 months, 1-2 months rest up, and 1-2 month rally to a top. This was followed with 6-7 months of rest with a mild decline destroying the last peak. This was followed with roughly 4-5 months up to the end of 2004. Again the market rested for about 4 months, before starting the rally that may have seen its last days.

SPY - Support 121 based on lower edge of uptrend channel and March Jun peaks. If 121 is lost, 120 is in the headlights, this is where it bounced early September and I think stronger support. Even though this violates the lower line of the present up channel, If this support holds, we may be in good shape. If we lose 120, I am much more concerned even though there is support at 119,

If we start testing these lower support levels, unless we take out the 124 high on the rebound, we may be defining either a sideways channel or a downwards channel. Even a bounce from the 120 that doesn't clear 124 could be forming a sideways channel.

QQQQ - Support 38.25-38.5 based on Sep low and Jan & Jun peaks. The lower edge of uptrend channel was violated at about 39! Feb, Mar, & June peaks provide support at 38. A bounce from 38 or below could be the set up of at best a sideways channel and more likely a mild downtrend channel. Peak Aug 40.25, Valley Aug 38.25, Peak Sep 39.75, Valley (TBD).

Notice when the red ADX line crosses upwards over the green, the ADX flashing a sell signal, there is still some follow through selling in many (? )cases.

http://stockcharts.com/h-sc/ui?symbol=QQQQ&period=DAILY&years=0&months=9&days=0&id=p51813940256

The Nasdaq Composite suggests in mid August we violated the lower limit of the uptrend channel in mid June. The failure to make a new high for the early September peak suggests the old uptrend channel may be of little use in determining the future. A drop to or below 2100 will set the case for most probably a new downtrend channel. http://stockcharts.com/h-sc/ui?symbol=$COMPQ&period=DAILY&years=0&months=9&days=0&id=p68236769063

The DIA uptrend channel (? ) is much more poorly defined. A Case can be made that is was violated at 104.5 or that it won't be violated till 103.5. The DIA offers support at 104, 103.5, and 103. If the 103.5 support point is used, it may make sense that we have entered a horizontal channel or a slight (? ) downwards channel.

http://stockcharts.com/h-sc/ui?symbol=DIA&period=DAILY&years=0&months=9&days=0&id=p86594317098

I expect soon, I will be more likely to be buying than selling. And even with this somewhat shortterm ominous outlook, I will merely be shifting the balance point of my portfolio.

I currently have a portfolio weight long, but with signficant bearish exposure via stocks of oil , gold, and uranium companies. I also have bearish exposure via QQQQ puts, and Rydex funds including RYVNX, RYTPX, RYCWX, and RYWBX. These positions were opened days ago, though I added to the Rydex positions today.

As always do your own due diligence and make your own decisions. No one knows for certain what tomorrow will bring. Only you can be responsible for your own decisions. I may hold bullish and/or bearish positions without warning and these may change without warning.

Micro update

2005-06-09T20:58:00.000-07:00

I haven't been blogging anywhere lately. I am still reading many blogs.

Micro's Musings

2004-09-25T22:20:00.000-07:00

Please visit Micro's Musings at http://thegoldencoast.com